Chinese acquisitions of U.S. companies fell 95% last yea
January 15, 2019 Category China News Round-up, Weekly
Chinese acquisitions of American companies plummeted 95% last year from its peak two years ago as the escalating trade war dampened deal-making activity. Purchases dropped to USD3 billion in 2018, continuing a descent from USD55.3 billion in 2016 and USD8.7 billion in 2017, according to Mergermarket. This sharp decline contrasted with an 11.5% increase to USD3.53 trillion in overall global mergers and acquisitions (M&As). The drop in U.S. purchases also took place while outbound merger activities in the Asia-Pacific saw a 52.4% jump to reach USD160 billion from the year earlier.
Major Chinese buyers including HNA and Anbang, which had concluded headline-grabbing acquisitions in the U.S., have been pulling back since 2016 as the Chinese government looked to bring capital back to encourage domestic growth. U.S. government efforts to tighten scrutiny of acquisitions by Chinese entities has compounded the pullback. The U.S. Congress passed a law in August that empowered an inter-agency body, the Committee on Foreign Investment in the U.S. (CFIUS), to broaden the scope of reviews of Chinese acquisitions on national security grounds. A number of large deals ran into trouble in 2018. Alibaba’s acquisition of U.S. payment company MoneyGram was shot down over fears that information about U.S. military personnel could be leaked to China. Alibaba is now looking to buy payment start-up WorldFirst in Britain.
Chinese mergers and acquisitions in Europe increased 81.7% to USD60.4 billion in the same period. In May, China Three Gorges, a state-owned power company, announced that it had agreed to buy the remaining 76.7% stake in Portuguese utility company Energias de Portugal. The deal, which is awaiting regulatory approval, was valued at USD10.8 billion and was the fifth largest acquisition in Europe last year.
Some of the biggest Chinese acquirers are now becoming sellers. HNA has put assets including hotels, real estate and airlines on the market. The firm has hired China Development Bank to advise on the sales, which could amount to USD50 billion. Anbang has hired Bank of America to advise on the sale of its U.S. luxury hotel portfolio worth about USD10 billion, the South China Morning Post reports.
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